(Bloomberg) -- A faster-than-expected retreat in euro-zone inflation will allow the European Central Bank to cut interest rates again before too long, according to Governing Council member Robert Holzmann.
Last week’s decision to cut by a quarter point was the “right one,” Holzmann, one of the ECB’s most hawkish officials, said at an event hosted by Bloomberg in New York. “I’m sure there will be others following in the future, and not too far.”
He added that “the deflationary process was much faster than we had thought.”
Policymakers have sped up the pace at which they’re easing monetary restrictions on the economy after surveys hinted at much weaker growth momentum ahead. Economists expect the ECB to cut again in December, which would be a fourth reduction in 2024.
Inflation fell below 2% in September, and even though it will likely pick up again in the coming months, there’s increasing confidence that it will sustainably reach that target sooner than previously anticipated.
If that should turn out to be the case — and it’s “quite likely” — it’ll be due to the weakening economy, Holzmann said.
“I would not dare to make any kind of projections,” he added. “But quite definitely if it goes faster down there, it may be linked with our lack of growth. If you have a decline in demand, then of course prices go down. I hope its softer and slower, but it may be faster.”
The ECB said last week it expects to reach its inflation target in the course of next year. Projections in September showed the goal being reached only in the fourth quarter.
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